Americans Are Feeling Better About the Economy. Here Are 3 Reasons You Should, Too

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KEY POINTS

  • Consumer confidence in the economy is rising despite inflation and recession fears. 
  • A solid jobs market may be lending to that sentiment.
  • It still pays to be ready for a recession by padding your emergency fund as much as possible. 

There's reason to be hopeful that things aren't all bad.

Is the U.S. economy in good shape? Well, it depends who you ask. But recent data points to the fact that Americans are taking a more positive view of the economy. 

The University of Michigan's recent consumer sentiment index just notched its highest increase since August. And while the general outlook is still gloomier than it was a year ago, it's clear that financial concerns may be easing among consumers on a whole.

Now, if you're still feeling iffy about the state of the economy, you may be in good company. But here are a few reasons not to get down.

1. The labor market is strong

In November, the U.S. economy added 263,000 new jobs, which far surpassed the 200,000 new jobs economists were predicting. Not only that, but the national unemployment rate held steady at 3.7%, which is comparable to where it stood before the COVID-19 pandemic took hold. A strong labor market is indicative of a solid economy, so that's something to feel good about.

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2. Inflation seems to be easing

Inflation levels are still quite high -- there's no question about it. But things seem to be improving. 

The Consumer Price Index, which measures changes in the cost of consumer goods, has shown smaller upticks in recent months than it did earlier on in the year. And some retailers are reporting that their inventory costs are finally shrinking. 

In fact, recently, Walmart's CEO revealed that toy, sporting goods, and apparel prices seem to be dropping compared to where they sat months ago. And while there are just a few specific spending categories, any sort of drop in prices is positive news these days.

3. Recession warnings don't seem as dire

Earlier on in the year, many financial experts seemed absolutely certain the U.S. economy would be heading into a recession in 2023. Now, they're saying that's a possibility, but if a recession does hit, it could be a mild one. 

Without a crystal ball, it's impossible to know what direction the economy is headed in. But still, it's nice to see some of those doom and gloom warnings ease up.

It still pays to prepare

The fact that Americans seem more optimistic about the economy than in months past is a good thing. But ultimately, it's still important to prepare for a downturn. And one of the best ways to do so is to shore up your savings account.

The more money you're able to set aside for emergencies, the better equipped you'll be to get through a recession. And also, extra savings can serve as a cushion if inflation somehow reverses course in 2023 and starts getting worse (an unlikely scenario, but one worth gearing up for regardless). 

All told, "prepare for the worst but hope for the best" is a good rule to follow when it comes to the economy. And if you take steps to bolster your savings, you're apt to see your personal outlook take a turn for the better. 

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